Increase in the business climate index. The week before Christmas

Last Friday, the dollar continued to strengthen and the rate of the main currency pair fell to around 1,08. We had a mixed session on Wall Street. Nasdaq Composite gained 0,2 percent, while the SP500 and Dow Jones lost 0,1 percent, respectively. and 0,8 percent

Throughout last week, benchmarks gained over 2%. which was the result of the Fed giving a signal that it is still relatively dovish and will probably cut interest rates three times this year. Data from the US was missing. The Ifo business climate index for Germany surprised positively. In the coming days market attention will be focused on Friday's data regarding the American spending report.

The business climate has improved

On Friday, investors received an unexpected boost Ifo business climate index with 85,7 points up to 87,8 points The increase was caused by both a better assessment of the current business situation (88,1 points, previously 86,9 points) and more confident business expectations for the next six months (87,5 vs. 84,4). The business climate has also improved in all sectors of the economy.

This recovery in the Ifo business climate gives hope, especially as the forward-looking purchasing managers' index for the euro zone services sector has increased in recent months and moved out of the recession zone. It is clear that the effect of the sharp increases in interest rates by Western central banks, which took place over a year ago, is now fading. Also economies are feeling relief from lower energy prices. The average price for German companies has halved from the previous surge, although they are still much higher than in the US, for example.

Perhaps the German economy will emerge from the recession in the summer. However, it will be difficult to find an impulse that would contribute to a dynamic recovery. Numerous structural problems are hampering the economy, in particular the long-term erosion of Germany's attractiveness as a business location.

The week before Christmas

Returning to the US, there was no macro data on Friday. Today we will learn the Chicago Fed's domestic activity index, Dallas Fed's manufacturing activity and new home sales. On Tuesday, data on durable goods orders, S&P CaseShiller house prices and Conference Board consumer confidence will be released.

The macro calendar is poor on Wednesday. It will be presented on Thursday third and final GDP reading for the fourth quarter of 2023. The market consensus is 3,2%. q/q on an annual basis, unchanged compared to the second estimate. We'll also see jobless claims, home sales and the University of Michigan's final March consumer sentiment reading.

On Friday, although it will be a holiday in many countries, there will be several data releases. We will learn the important PCE deflator for February, and the market consensus is 0,4%. m/m or 2,5 percent y/y. The core PCE deflator, which excludes food and energy, is expected to be 0,3%. m/m or 2,8 percent y/y. We will also learn about the personal income and personal expenses of Americans.

Source: Łukasz Zembik, OANDA TMS Brokers